Corporate Governance and Performance during a Global Crisis

In this paper, we aimed at exploring the effect of leverage, institutes and overall corporate governance on company’s performance during the crisis. Firstly, we explored theoretical relationship among leverage, institutional indicators and corporate governance and its independent and joint influence on company’s performance. Secondly, the model, which quantitatively estimates the effect of the interest, was constructed. Thirdly, analysis of the results were performed to understand how corporate governance and country-level institutional environment along with leverage affected the way company responses on crisis. We used information about 751 non-financial companies for the period of 2007-2009. We found that corporate governance affected positively company’s performance in all cases. We also saw that even in case of good corporate governance, the effect of leverage was negative, and the higher the score for corporate governance, the more negative the effect of leverage. Therefore, in crisis times, in case of high leverage, corporate governance did not help to overcome possible negative incentives of managers. Moreover, we saw that in poor legal environment, there was more positive influence of corporate governance on company’s performance. However, we got this result only for ROA and obtained mostly insignificant results.